Minority and/or Disability Trusts are often added as a standard clause in a Will, providing that if any assets are left to a young or incapacitated person who is not receiving Supplemental Security Income (a Special Needs Trust is required if SSI is involved), those assets will be held in trust. Rarely do I prepare a Will that does not include either a Disability or a Minority and Disability Trust. It is easy to add such a Trust and it prevents the possibility that at the decedent’s death, a young adult will inherit a substantial sum of money, use that money to buy, buy, buy and then be virtually broke within a year or two. Believe me, I have seen this unfortunate occurrence on more than one occasion.
If there is no possibility that any beneficiary (including as yet unborn grandchildren) will be under age 25 at the decedent’s death, then I usually just add a Disability Trust. This normally provides that if any beneficiary is incapacitated at the time of death, then his or her share is held in trust, to be distributed by a trustee for the health, education, support, maintenance and/or emergency needs of the disabled beneficiary. A person is considered incapacitated if a court declares the incompetency in a court hearing. However, one can also be treated as being under legal disability, incompetent, or incapacitated if so certified in writing by his or her personal physician. If the person recovers and becomes competent, then the money is released to the beneficiary outright. If not, the money remains under the control of the trustee until the money is depleted or the beneficiary dies.
If any potential beneficiary is or may be under a given age (usually 25 or 30 years of age) at the time of death, then I usually add a generic Minority and Disability Trust – that combination allows money being left to anyone who is potentially too young to exercise good judgment or to anyone who is incapacitated to be held in trust. As with the regular Disability Trust, the money may be used for the beneficiary’s health, education, support, etc. The trustee invests the money and distributes it slowly over time for the benefit of the young or disabled person.
I also usually add an “Accelerated Termination” provision to the Will, to go along with the Trust. This clause provides that the Trust may be terminated early (before the disability ends or before the beneficiary reaches the age or 25 or whatever is set forth in the Trust) if the Trust becomes too small to administer. We recently vacated a Trust for a 21-year old whose grandmother had left her $50,000 by paying that money directly to the college the student was attending. We also terminated a Trust that was left for a minor grandchild that was only $2,500, by depositing that sum directly into a bank account for the minor. Keeping small trusts active often makes little financial sense, especially because a Trust is obligated to prepare annual tax returns.
Trusts may continue for decades – so name an original trustee and several alternates. Choose people who will make sensible financial decisions, being fair but not overly generous, because the trustee should try to preserve capital if at all possible. There is no need to choose trustees who are geographically located close to you, since a trustee can function from anywhere in the country.
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|Bonnie Smith Moses|
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|Hope Bosniak||Sam Rossittto|
|E-Mail Hope Bosniak||E-Mail Sam Rossitto|